South Korean and Japanese Alliance?

Hands shaking with South Korean and Japan flags over them

We’ve all heard the saying “the enemy of my enemy is my friend,” but I’m not sure if that applies to South Korea and Japan forming an alliance against China.

The animosity cuts deep between South Korea and Japan, so we’re not off to a great start. South Korea’s defense efforts are almost solely focused on deterring North Korea. On the other hand, Japan has built up a capable blue-water navy. However, both powers are heavily dependent upon imported raw materials and exported goods.

That means Japan will likely be able to adapt, but the South Koreans are going to be digging themselves out of a much deeper hole as globalization collapses. So, an alliance between these two is unlikely…but the Japanese may have to reevaluate their options if the current US administration continues to undermine the relationship.

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Transcript

Hey, all. Peter Zeihan here. Cody from Tower Pass in the boundary between the Hoover National Forest and Yosemite. Going the other way. Hey, I’m out of shape. Anyway, I’m obviously backpacking, and today we’re gonna take a question from the Patreon crowd specifically. Do I think that the best option for the Koreans and the Japanese is to form a bilateral alliance against China? 

Looking at a map. You got something there? You’ve got an island and peninsula that are off the coast. And if they decided to band together, there’s a lot that they could achieve strategically. However, I don’t see it as very likely. The Koreans. Oh, my God, they hate the Japanese so much. The Japanese have carried out a few genocides in the Korean Peninsula, the most recently during World War two, and they actually forced everyone to change their names. 

And if there’s one country in the world that the Koreans would not want to deal with, it would be Japan. There’s also the problem of longevity of any sort of alliance, and Complementary factors. 

The Koreans spend a lot on defense. Some of the most. If anyone in the world has a percent of GDP, but it’s solely focused on the North Korean threat. And so their navy is very small for a country of their size, very small for a country with their sort of defense spending. And it’s not blue water at all, as opposed to Japan, which doesn’t have to worry about a land invasion at all. 

And so basically, all of their investments in defense, which are significantly lower, have gone into having a blue water navy. In fact, are only four super carriers in the world that are not American flagged. Two of them are Japanese, and they fly American jets. So, the real problem, though, that makes it problematic for the two countries to form a meaningful alliance, is that they’re kind of in the same boat. 

They both are utterly dependent on imports for raw materials, especially energy. They’re both dependent on exports of finished goods. Korea far more in terms of that latter factor than Japan. 

And so when globalization kicks in. They’re both going to need the same things. And only one of them has a navy to go get it. The thing to remember about Japan is Japan has agency. So as relations change economically and strategically and politically around the world, it’s one of the countries that actually has things it can do. So if there’s one country that the United States should go out of its way to try to have a positive relationship in the Asian theater, it would be Japan. 

Unfortunately, we’re moving in the other direction. If you remember back to Trump one, the Japanese very cognizant of their war history with the Americans. Sought out, Trump won to cut a trade deal. That was humiliating. Their goal was to never be on the wrong side of the United States. And they figured if they could cut a deal with Trump Representative MAGA, then they would be good. 

That lasted until Trump two and Trump started to abrogate trade deals, even ones that he negotiated. And while negotiations with the NAFTA countries really have some major economic impact for the United States, the one with Japan has always been more strategic. And so the Japanese found that if they did everything that they thought they needed to do to play, say, Trump, it still doesn’t mean anything. 

And that means we have a country with agency that is evaluating options, and that takes global politics and Asian politics in a very different direction.

Slavery Can’t Fix China’s Demography

Young Chinese children

To be thorough in our discussion of China’s demographic collapse, we must explore as many potential solutions as possible…even if one of those is a UAE-style model of imported workers (aka slavery).

China is already implementing quasi-slavery to help feed their solar industry, but this barely dents the demographic problem. The scale needed to flip the demographic script just isn’t feasible; we’re talking about importing at least 100 million workers. Any idea where that would come from?

The reality of the Chinese demographic situation is that their traditional system cannot withstand it, but that goes for capitalism and socialism as much as communism. So, new economic models will be ushered in, we just don’t what those will look like yet.

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Transcript

Everybody car video today, running errands, and they don’t have time. Anyway, I’ve got a question here that’s come in from the Patreon crowd. And it’s about experimenting with new economic models. So the world that we’re moving into is facing population collapse among people who are under age 55, having places like China, Japan, Korea and Germany and Italy first, and then moving on from there to other places. 

So the question is, how about some models that we generally look down upon because they’re, you know, gauche, like slavery, specifically, could China replicate something like, the United Arab Emirates has done where the population, is basically sustained by a huge imported workforce that does all the serious work. Could you do something like that while the Chinese agent of mass retirement. 

Two problems with that strategy. Number one, they’re already doing it to a degree. Keep in mind that while 90% of the population of China is Han Chinese, there are a number of minorities that haven’t been completely genocidal into nonexistence. And one of them, the Uyghurs of western China in the Zhejiang region are already existing in a degree of slavery. 

They they stationed Chinese Communist loyalists within the homes of people to make sure that people don’t have kids. And anyone who shows any sort of religious inclination, like wearing headgear, for example, or maybe saying a prayer in private is sent off to a reeducation camp, which is basically a work camp. And so almost everyone who has installed a solar panel in the last four years is benefiting from that system on a global basis because the silicon is processed and turned into solar lakes, in Zhejiang. 

And that really hasn’t moved the needle very much. Now, of course, there are only so many viewers versus, you know, ¥1 billion. Which brings us to the second problem is scale, when you’re in the United Arab Emirates and you only have a single digit number of million of Arabs that need to be supported with imported workforce, that’s one thing, especially when you’re drawing people from, say, Palestine or Pakistan or India. 

But there are a lot more Han. And so you would need to import bare minimum cheese. At least 100 million people in order to make a system like that work. And the scale of that just is not possible. And if you look at the countries that border, 

China, there’s no easy source. Russian Siberia is largely unpopulated. 

Everything east of the Urals is under 15 million people. Kazakhstan has of more people than that, but most of them aren’t in the border region. Most of them are further north. You get to Duke of standing Kyrgyzstan again. The eastern reaches are completely uninhabitable. And if you go south, you’re hitting Vietnam. And if the Vietnamese hate the Chinese more than anyone else. 

Myanmar is jungle and mountain, and most of their people are again on the other side of the mountains. And and of course, India is on the other side of the Himalayas, and that is everyone. So, you’d be having to bring in literally tens of millions of people from at least a couple thousand miles away. So the feasibility of that is not great. 

But keep questions like this coming, because we’re gonna have to figure out something as the world the populates the relationships among supply and demand and labor and capital are all breaking down. And the models that we have now, whether it’s fascism or socialism or communism or capitalism, simply aren’t going to work much longer for a lot of countries. 

And the sooner we come up with some other ideas, the better.

These Six Countries Are Running Out of People

kids holding hands

We’ve kicked, flogged, and beaten the snot out of China’s demographic horse, but what other countries are facing a similar demographic decline?

Germany, Japan, and Italy are first on the list. These countries got an early start on industrialization and urbanization thanks to their geography. Thus, rapid aging and population shrinkage was locked in for these WWII Axis powers. South Korea’s rugged terrain meant urbanization was essential, which has translated to them being one of the fastest aging societies in the world.

India and Brazil started down this road much later than the rest of this list, but decades of low birth rates, low fertility, and limited technological upgrades put them in a difficult position. Should these trends continue, they could face severe demographic and economic challenges before reaping the benefits that come along with industrialization.

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Transcript

Hey all, Peter Zeihan here. Coming to you from your cemetery park, the northwest part just above Tilden Lake over there. And, it’s chit chat and peek in the back. I’m not sure about that, though. Anyway, taking another question from the Patreon page. 

Aside from China, which has the worst demographics in human history and is looking at societal collapse within a decade. 

What other countries make your top ten list? Let me give you six. How about that? Just one video. The first three, are the countries that industrialized first and urbanized heavily first. And they are Germany, Japan and Italy. 

The situation all three of these countries is that they were among the first countries to pick up the industrial technologies and get what they needed to go into urbanization in a very big way. 

It happened in Germany very, very quickly because Germany used to be a series of a number competing regions. And so when all of a sudden they got electricity and rail, it was very easy for these regions to each set up their own node. They tried to compete with one another a little bit. We had a series of conflicts in the 1800s, and eventually we got the urbanized Germany that led into the world wars, in Japan, very similar. 

The region’s topography is very, very rugged. So as soon as the technologies were available for people to live better, they chose to and they moved into high rises. Italy’s a little different. Italy’s population is concentrated in the Po Valley. And if you remember your Machiavelli, Italy is a series of, again, competing city states. And so once you got the technologies to go up instead of out, everyone did it anyway. 

These three countries, their geographies and their political history is really meshed with industrial technologies. You will notice that all three of these were the axis powers in World War two. That is not a coincidence, because when these countries started to urbanize and industrialize, they got a burst of national power that they used, perhaps unwisely. But that’s not a coincidence. 

Next country down is Korea. Korea is the head of the what they used to call the mix. The newly industrializing countries of East Asia. 

Korea’s geography is a little bit like Japan’s in that it’s very, very rugged. And people live on a few chunks of flat land. And so when industrial technologies came about, you could move from rice farming into a high rise. 

And that was kind of a no brainer for most people. In addition, they had so little land that once they got the industrial technologies, they were able to reclaim land from the seas. And those again went straight up. as a result, with the exception of China, Korea is arguably the fastest aging society in the world now. 

The next two are countries that I’m not worried about now. But if things don’t change, right, I’m going to be worried about them. Very much so in 20 or 30 years. Not that that’s going to be my problem at that point. But anyway, and those are, Brazil and India. Now, these are countries that came late to the game. 

They didn’t really start seriously industrializing until the 1980s, early 1990s. But because the path has been paved and all the technologies have had been invented, they were able to adapt those technologies very, very quickly, urbanize very, very quickly. And so as a result, their birth rates are significantly below the United States at this point. If they keep aging at their current position, they’re not going to enter a Japanese style crisis until like 2070. 

I mean, there’s still a lot of time for this to go a different direction, but we’ve already had 40 years of record low birth rates for both of those large developing countries, and unfortunately, they have not moved up the value added scale like, say, the Germans or the Japanese or the Koreans have in the time that it’s taken them to industrialize. 

So if, if if nothing changes on the birth rate front, those two countries will be looking at, demographic degradation without the attendant increase in technological prowess, skilled labor, or standard of living. So, you know, if you’re in India or if you get in Brazil, chop, chop. You got some work to do. Yeah. That’s top six. 

Okay. That’s it. See you guys on the other side of the lake.

The Future of Bolivian Lithium

photo of lithium

Bolivia is in the midst of a political reshuffling that could alter its minerals future.

For decades, Bolivia’s socialist government has kept the country poor and starved of foreign investment. On top of that, the complex internal political situation between the indigenous population (who live in the regions containing these vast lithium reserves) and the rest of the country, makes accessing these minerals complicated.

A more market-friendly government may embrace foreign investment, but that could upset local communities. Even if they can figure that out, the Bolivians couldn’t have chosen a more challenging time; global demand is entering a lull driven by unsteady US industrial policy and Chinese demand for raw minerals is fading.

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Transcript

Hey, Peter Zeihan here. Coming to you from lake, Monona terrace here in Madison, Wisconsin. The land of cheese curds. There is the Capitol back there. Today we’re talking about a country that does not come up often, and that is Bolivia. They recently had a pretty significant shift in their electoral system, it’s resulted in a significant shift in political alignments. So back going into the early 2000, Guy by the name of Evo Morales came in who was a poor coca farmer, became president. Started Bolivia on a path towards what they call socialism. It’s really, low grade populism. 

And I don’t want to say he drove the economy into the ground, because that would imply that most of Bolivia was doing well before. But he certainly didn’t leave the place better than he found it. We’ve had 20 years of governments that were of Evo Morales or people like him. And the country, was already functionally the poorest of the major states in Latin America. And it’s still in that position. Bolivia is split into two chunks. And that’s part of the problem. 

You’ve got the lowlands in the east that are basically an extension of the agricultural zones of Brazil. About one third of the population lives there, mostly European descent. It’s mostly an agro industrial economy, not the most productive on the planet, but still you know, it’s a hungry world. So you produce agricultural exports and it does. Okay. The upper two thirds are indigenous. 

And the reason the indigenous live in the upper two thirds is they were killed everywhere else. The Native American experience in South America is not significantly better than the one in the United States. In most places, Bolivia is only a partial exception, because when you move upland, what we discovered, what humans discovered throughout the 1415, 1617 and 1800s is that the locals were able to reproduce and women were able to give birth at 12,000ft, whereas the Europeans cannot. 

And that singular biological difference. The people who had adapted to that before the Columbian Times, were basically able to populate this zone. Bolivia had a number of very, very, very, very, very, very stupid governments in the 1617 hundreds, in the 1800s. And they generated one of the original rules of Latin America is that no matter how many wars you lose, you can still beat Bolivia. 

And you can also count on them to pick the fight. So Bolivia lost a lot of territory, was basically reduced to what it is today. And most of the land is of limited use. That doesn’t mean that in the modern times it’s of no use. 

In some ways, what’s going on? Bolivia is a little similar to what we have in the United States. In the United States, we’ve been mining the country since formation, since a little bit before formation. And so most of the really good metal deposits have been mined out. And as we enter a world where we know, we know we need different sorts of materials, most notably things like rare earths or lithium. 

We’re going into places that we really haven’t mined before, and there are very, very few of those. And most of what they are are on or near Native American lands, which in the United States, for the most part, are reservations. Now, the native population in the United States is only about 1% of the total, and all of their lands are directly controlled by Congress and the Bureau of Indian Affairs. 

So if the federal government decides to force the issue, it can’t. That’s not how it works in Bolivia and Bolivia. Those zones are where two thirds of the population live, two thirds of the population is native. And you can’t just wave an administrative wand and make it happen. So it requires a lot more negotiation, and the local communities have a lot more say in how it goes down. 

As a result, under the governments of Evo Morales and his successors, we basically had the federal government in Bolivia say that any sort of extraction had to involve the federal government as well as local groups, and that created such onerous terms. Really, no one played the Russians and the Chinese, you know, toyed with the idea, but really we’ve had no meaningful production. 

And Bolivia is part of the lithium triangle that connects Bolivia, Argentina and Chile. So there is no doubt that the minerals are there. Just the legal structure to get them out has not existed. 

Give you an idea of just how far behind how backwards Bolivia is in this regard. Argentina, where foreign investors are actively penalized. And it’s discussed publicly, has significantly more foreign investment in their space and development of the lithium fields than Bolivia does. 

Basically, less than 1% of the world’s lithium comes out of Bolivia, despite them having arguably the best deposits on the planet. So with this new government, will this change what might have having a federal government that is more pro-market is probably going to take us into a different direction, but it’s not going to obviate the fact that two thirds of the population still lives in the zone that controls the political decisions that are required, so we’re more likely to get a lot of civil unrest if we move in the direction of greater mineral extraction. 

There’s one other thing to keep in mind. One of the reasons why Bolivia did okay during the last 20 years is commodity prices have been pretty high because the Chinese basically hoovered up everything, and that allowed a little bit more production to come out of Bolivia than normally would have. We’re now kind of in this moment where we’re hanging. 

The Chinese are still churning along, building stuff, but the demographic situation is atrocious, and they’re not going to be with us a lot longer. At the same time, we’ve got the United States where there seems to finally be this economic and political understanding that we need to do a massive re industrialization program. But we have a government that is actually penalizing people who do things in that direction with state ownership or with tariff policy. 

So we’re kind of hanging right now. The trends up Demand of the past are fading very fast, and the trends of Demand of the future haven’t really taken hold with policies that are going to really encourage them. And that means we’re at this soft point for commodities where the Bolivians are trying to make decisions. So they’re making the decisions about the right things at the right time, but they don’t yet have the economic impulse that would make it really, really stick. So tough times for the Bolivians. Let’s see what happens on the other side of this flip.

Regime Change for Venezuela

The Flag of Venezuela

The Trump administration is sending the USS Ford, America’s most powerful supercarrier, to the waters off Venezuela. It’s an unprecedented move that could signal a coming regime change. Let’s break down what this means.

To watch our previous video discussing what a Venezuelan incursion might look like, here is the video link.

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Transcript

Hey, all Peter Zeihan I’m here coming to you from Colorado. And it looks like the Americans about to knock off a government. The Trump administration has just ordered the USS Ford Super carrier to the waters off of Venezuela, from where it currently is in the Mediterranean. The ford is probably 60%, 100% more powerful than the Nimitz super carriers that have been the backbone of American power for the last 50 years. 

It hasn’t been bloodied in a real fight yet. So this is going to be interesting from any number of angles, but, you don’t send a super carrier somewhere in the Western Hemisphere unless you really have something important to do. The last time an American super carrier was involved in an operation in the Western hemisphere was in 1983, the Grenada operation, where I would argue it was overkill. 

That was an old forester, Forrestal class. This one is much, much, much, much, much bigger. Before that, I mean, let’s see, carriers were involved in the Cuban Missile crisis, but nobody ever shot at anyone there. And, and that’s it. So unprecedented by any number of matters. You could make the argument. Maybe the Trump administration is just trying to intimidate the government of Venezuela, which is led by President Nicolas Maduro. 

There are a lot better sticks for that, I would argue. Keep in mind that over the last few weeks, the United States has not just been going after what the, government of the United States says are drug boats, but is also said publicly that the CIA has kind of been let loose to carry out operations in the country. 

There is already, the USS Iwo Jima, which is a wasp class amphibious assault vessel, which in any other part of the world would be called a supercarrier. But for the United States, these are smaller carriers that also just happened to carry a few thousand Marines. So if you have a supercarrier in order to do strategic overwatch and air bombings, and you have the Marine Expeditionary Unit based on the EO jima, that is going to do, land incursions, this is how you knock off a Latin American government in a weekend, and it probably will only take that amount of time. 

Now, whether this is a good idea or not, push that to the side. Whether Congress is going to be notified, push that to the side. There’s a lot of details here that under normal circumstances, the American political system would be debating and discussing. We are not going to see that this time around because Donald Trump, at least at the moment, still has a lock on the Republican Party in Congress. 

And I really don’t see Congress doing anything unless and until we actually see American soldiers and body bags and this sort of operation. This should not be hard. The government of Nicolas Maduro is really just a couple of dozen dudes, and getting rid of them should be very, very easy. With the assets that seem to be steaming into the region, does that mean the next day will be pretty? 

No. This will probably trigger some sort of civil war and state collapse. The few thousand Marines that are on, I mean, you are nowhere near enough to impose a reality on the ground in Caracas, much less the wider world. We did a video a couple of weeks ago about what it be like to be to impose rule on Venezuela. 

We will share that video again. You don’t want to get involved with that. So this seems like a bomb it and forget it situation. Keep in mind that the Maduro government is so incompetent that they mismanaged selling crude to get dollars to buy food, to feed their people to such a degree that the average Venezuelan a few years ago lost 20 pounds in oil in a year, full on famine. 

You remove the government. That’s probably the only way you could make something worse. So last time that encouraged almost one third of the Venezuelan population to flee the country to avoid famine. We’ll probably see something on that scale again in the months to come. Should this be what the Trump administration has planned?

Bonus Video – Russia: Trump Pulls the Trigger

A Russia and Ukraine button on top of a Ukraine flag

After months of being played by the Russians, it seems US President Donald Trump has had enough. On 23 October the United States has fully sanctioned Russia’s largest oil firms, barring interactions with US firms and corporations. Here’s what it means, what’s at stake, and what’s next.

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Transcript

Hey all. Peter Zeihan here coming to you from Winona Terrace in Madison, Wisconsin. Just had some fried cheese curds for breakfast because, duh. Today, it’s the 23rd of October, and we have to talk about what just went down between the Trump administration and the Russians. Trump has been trying to force the Russians into a peace deal. 

It’s not going to happen. The Russians, see the war in Ukraine as the start of a broader geopolitical offensive that they need in order to survive through the century. The right, basically, it’s a border issue and a demographic issue. They didn’t do the Ukraine war on a whim. They didn’t do it to satisfy someone’s ego. 

They did it because they think they need it to survive. Anyway. 

Trump is attempting to put a stop to the conflict. And so the Russians have been stringing him along, making him look like a fool and then going back on everything they agree on. Anyway, Trump has had enough of it, apparently. 

And today Trump put sanctions on the two largest oil companies in the country. One of them is Rosneft, which is the state owned monopoly or near monopoly. And the other one is Lukoil, which is technically a private firm but takes its cues from the government. 

Full sanctions, which basically means that any American national cannot do business with any of these companies. The impact on the United States is going to be limited to Lukoil at the moment. Lukoil has a number of gas stations, service stations throughout the country, about 150, and supplies crude and gasoline to the U.S. market in a limited way. Rosneft is different. Rosneft is does all of its business in Russia. It’s not particularly sophisticated company. 

It just happens to be large and it’s absorbed pretty much all of the activity in the former Soviet Union that it could, So direct impacts on, Rosneft are somewhat limited. There are some projects that Rosneft and Lukoil have with American firms in the former Soviet Union, however, not Russia proper, primarily in Kazakhstan. There’s a super field called Crouch Cannot that does natural gas, oil and condensate. 

And then there’s the super field of Tengiz, which is on the shore of the Caspian that ExxonMobil is very involved in. If these actually get shut down, you’re talking about multiple billions of dollars of loss for American companies. In the case of Lukoil, they’ve put over $20 billion of investment in this thing over the last 30 years. Now, I would argue that all of this was going to go down anyway sooner or later. the Kazakh crude that was coming out of Kazakhstan was always going to go away. The route is just to secure this, you have to go through, not just difficult parts of Kazakhstan, but then through Russia to get to the Black Sea, to load on a shuttle tanker, to get out to sea, Istanbul. 

Eventually you get to the Mediterranean, we can get on a bigger tanker and eventually go around Africa or through Suez and eventually get around India. You know, it’s just it’s a crazy route. It only works in a fully globalized, safe world, and that’s not where we are anymore. So this was all going to fail anyway. But at some point you rip off the scab and it looks like we might be there now. 

This is not enough to even remotely make the Russians consider changing their point of view. The only thing that might, might, might get their attention is a full embargo by the United States and the Europeans that prevents any crude and any natural gas from leaving Russia whatsoever. That’s going to require a lot more than just this. But it is the first time that the Trump administration has done anything that isn’t even marginally inconvenient for the Putin government, and it’s going to be interesting to see how the Russians respond to that the next stage, because I don’t think this is going to generate the effect that Trump wants is to look at something called secondary sanctions, which is something that the United States kind of has a bad rap of with the wider world. Basically, we don’t like you, so we’re going to sanction anyone who does anything with you. Iran has always been the key target of that. And secondary sanctions have often targeted a few, European companies here and there. Well, the Europeans really don’t like the Russians right now. 

So if we get secondary sanctions, they’re probably going to go against countries like India and China. And then we’re in a very different environment. We’re not there yet. But this result is, from the Russian point of view, relatively minor. And it’s not enough to seriously get their attention. And so if Trump is serious about pressuring the Putin government, that is the next step. 

The question, of course, is whether Trump’s cabinet and institutions can handle that. We still haven’t seen Trump build out the government. It’s still be cleared out. The entire government. When he came in, he still hasn’t replaced most of those positions. And implementing the secondary sanctions requires a lot of legwork in a lot of places. Unless you just want to say, I’m sanctioning everything in China, which would be, you know, notable. 

So he’s probably gonna have to find some sort of hybrid approach, and he’s probably gonna have to create it from scratch with minimal input from a team that largely doesn’t exist. So we’re seeing in real time some of the weaknesses of the Trump administration’s ability to implement policy. But again, we’re not there yet. That’s probably a challenge for next week.

A Reckoning for Pakistan

On Duty Pakistan Air Force Wing Commander

The recent deadly clashes along the Pakistan-Afghanistan border have less to do with current events, and more to do with the fractured ethnic and political foundations of the countries. So, let’s look at the mounting instability threatening Pakistan’s internal cohesion.

Remember that the turmoil facing Pakistan is a broader trend. As globalization unravels, countries that rely upon foreign funding or have entanglements with outside powers will face a painful reckoning like this one.

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Transcript

Hey, all Peter Zeihan here. Coming to you from Colorado. Windy day today. Sorry about the sound quality. If it’s not great. Anyway, today we’re going to talk about what’s going on in Pakistan. We’ve had a number of clashes that have killed quite a few people on the border between Afghanistan and Pakistan. And to understand what’s going on, we need to look at the wider South Asian region to understand kind of the origins of this and how it’s likely to unfold. 

So, step one. Once upon a time, there was a people called the Punjabi who lived along the banks of the Ganges River in the Indus River and in a low saddle, a fertile land in between. But at one point an invading horde came through and converted half. Well, less than half some of the Punjabis religion, and so the majority, along with the Ganges, remained Hindu, and the minority over on the Indus became Muslim. 

And that subtle and in-between kind of got split down the middle. Time went by and eventually the Brits came, as they tend to and conquered the area as they tend to, and loaded everybody into the same political, unit, because that’s what the Brits do. They won. The British Empire fell apart after World War two, and independent India now had to deal with the consequences of these different religious groups being under the same roof. 

We almost had a Civil war, and it was solved with the territory of the force known locally as partition, in which independent Pakistan emerged from the old British Raj of India, giving birth to the two states that we now know today, more or less. Basically, the best way to think about it is that the Indians and the Pakistanis, especially the Punjabis, are all part of one family. 

And as we all know, family arguments are the worst. I can already hear my Indian and Pakistani friends like, no, we’re not family. But you know, it’s like saying American. So we’re all family. Democrats and Republicans are all family. And so of course, we argue the loudest with the people we know the best. Anyway. 

In independent India and smaller post partition, India, the Hindu Punjabis are far and away the largest ethnic group. And so while it is still a multi-ethnic state with different religions and different ethnicities, the Punjabi Hindus have pretty much always been large and in charge. And I don’t mean to suggest that it’s perfect. From time to time. 

Somebody from one of the minorities kills a prime minister. So it’s not a perfect setup, but for the most part, India has managed since partition with a surprising grace and has managed to keep their democracy mostly intact, which is quite an achievement in my opinion. Hasn’t gone that way in Pakistan because in Pakistan, well, the Muslim Punjabis of Pakistan are the most powerful group and the most numerous group. 

They’re not a majority. There’s somewhere between 40 and 50% of the population. And so they think that they should be in charge all the time, but they lack the numbers to achieve the sort of regular electoral victory that, the Punjabis and India can generate. So you get these bursts where they try democracy for a bit, and then it gets a little too rowdy with all the minorities. 

You get a military coup because the military is pretty much controlled by the Muslim Punjabis. And so you have this in and out, and it’s one of the many reasons why Pakistan is much less stable and has not grown economically nearly as much as India since partition. All right. Here’s the backdrop. Now, within Pakistan. 

we have a different problem because it’s a plurality, 40 to 45, 50% of the population. It’s also geographically concentrated. You’ve got sins in the south, you’ve got Baluch. She’s out west. And most importantly for today’s story, you have pushed to or Pashtuns, that are in the northwest part of Pakistan, in the rugged area up against the border with Afghanistan. 

Now, some of you may remember push to. As part of the Afghan story and you’re remembering correctly because about a generation after partition, the Soviets invaded Afghanistan. And the push to of Pakistan made common cause with the push to of Afghanistan and fought alongside American support, the Soviets in Afghanistan. 

And for those of you who want to come across a really good historical documentary of how that broke down, I would point you towards Rambo three. Anyhow, a few years later, the Soviets were gone and the Americans decided it was their turn to be in Afghanistan. And once again, the pashtu of Afghanistan, popularized by the group known as the Taliban and the past. 

Who of Pakistan, who had their own group called the Pakistani Taliban really creative. They’re made common arms against the Americans. They did a quite a good job of it, in part because America’s supply lines into Afghanistan just go through Pakistan. They went through the push to part of Pakistan. Real logistical nightmare. I’m going to cut until we get out of the wind. 

Where was I before? The women are up to. I can’t stand. So, less than a generation after the Soviets got kicked out, the Americans went in, tried to reshape it to their whims. And once again, the push to on the Pakistani border came to the aid of the brethren on the Afghan side. And by the way, the, pashtu on the Afghan side, a lot of people know them as the Taliban and the Pashtu on the Pakistani side. 

A lot of people know those folks as the Pakistani Taliban. You can see how they get along so well. Anyway, eventually they were successful for a number of reasons, a number of ways, with a lot of contact and history and baggage getting the Americans to leave, too. So during this entire process, going all the way back to partition, the Punjabi Muslims of central Pakistan, you know, the powerbrokers, the people who control the military have always tried to use the Pashtun as a lever to extend their influence beyond their own borders, not just against the Soviets and the Americans. 

It’s an ongoing strategy. But the thing is, is, unlike the Democrats or Republicans, these guys are not family. These are different ethnic groups with different interests who see the world through different lenses. And the primary difference is that the pashtu, see themselves as divided by an artificial border, whereas the Punjabis of Pakistan see themselves as large and in charge, and their brethren on the other side of the Indian border have their own state. 

So it’s a different sort of clash. 

Well, what’s happening here is what you would expect to happen when you have deliberately militarized and agitated one of your minorities for use in a war on the other side of an international boundary. When that war ends, the people stay radicalized and armed. And so we’re now in a situation where the pashtu of Pakistan and the pashtu of Afghanistan are cooperating against what they see as a colonizing force, which is at this time, instead of being the Soviets or the Americans, it’s the Pashtu Pakistanis own code nationals within Pakistan. 

And if they had their way, we would be seeing another partition here with Pakistan being split now, is that going to happen? Who knows what can happen in history, especially history that hasn’t been written yet? And the Punjabis certainly aren’t going to go down quietly. But what we’re seeing now is the built in tension of the Pakistani state, finally being laid bare for all to see because the colonial wars, at least for the moment, are now over. 

Does this matter beyond Pakistan and Afghanistan in the short term? Not really, but in the long term, you need to consider a couple of things. Number one, we are moving into a globalized world where the rationale for states is going to evolve and the economic models are going to change and trade patterns are going to mutate drastically, which means that every nation state in the world, every government in the world, is going to have to recalibrate and re justify or change the circumstances of the social contract by which their population infuses with their state. 

In Pakistan, that’s probably gonna be pretty rough. And we’re seeing the early stages of that right now. But that doesn’t mean that’s the only place that’s going to happen. Any place where the economic, social and political order are based on broader international conditions. You’re going to see this sort of shift. And I would expect it to be most dramatic in places that really benefited from the old system. 

I put Germany at the top of that list. Iran might be up there two, moving forward, we should expect to see a lot more Pakistans than we do India’s places that are more consolidated. Keep in mind that India never bet its economy on globalization. It was, if anything, on the Soviet side. And so it doesn’t have nearly as far to fall when globalization goes away, whereas Pakistan has basically been paid by someone, most recently, the Americans, to exist in its current form in order to succeed in a war in a different territory that’s over Pakistan now has to figure it out on its own. 

And not all Pakistanis are of the same mind as to how that should go.

Trump and Petro Revive the Colombian Cocaine Industry

Trump just cut off military and economic aid to Columbia, because of…you guessed it…a political clash with President Petro. Bonus points if you guessed that this move would have some adverse effects, like reviving the Colombian cocaine trade.

Colombia’s geography is divided between the fertile lowlands (ideal for coca cultivation) and the populated highlands. Naturally, a divide between the two formed; that fueled a civil war, until the US stepped in to help defeat the militias and fund new programs to replace coca, with coffee, flowers, and cocoa.

President Petro—a former M-19 guerrilla member turned political malcontent—has been alienating allies and as US support fades, these once successful programs will collapse. Leaving coca as one of the few alternatives available to these farmers. And it just so happens that the US is likely to see a shift away from fentanyl and back to more traditional drugs…like cocaine.

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Transcript

Hey all, Peter Zeihan here. Coming to you from Madison, Wisconsin. And I thought this would be a great backdrop to talk about cocaine. For those of you who have been following the increasing drama that we’re having in American foreign relations with Latin America, Colombia is the new country that is in the Trump administration’s crosshairs. Specifically the president of Colombia. 

Petro and Trump have had a personal and professional falling out, and the United States is now withdrawing military support as well as economic aid. And I think it’s good to put this into context so you can see what’s coming. The reason that two thirds of the world’s cocaine comes from Colombia is really straightforward. It’s got the climate for it. 

Colombia is basically a series of lowland tropical zones, either on the Pacific or in the, Amazonian basin, separated by a couple of really high mountain ranges. Now, people not liking it too hot or humid tend to live in the middle of those ranges. So below the tundra line, but above the tropic line at high elevations, not too hot. 

That way the heat gets cut. The humidity gets cut. Cocaine doesn’t like it there. Cocaine doesn’t like frost. It likes to be lower down more in the foothills between like 1000ft. Maybe 7000ft. It likes a lot of sun 12 hours, a sunny day would be great. It likes a lot of humidity, but it doesn’t like a lot of wet. 

So growing on the sides of mountains where there’s a degree of fertility, further down is what it’s after. And once warmth, but not too much heat. What humidity, but not too much wet. Never never, never once cold. Well, if you put an illicit narcotic with a preferred geography in one part of a country, and you put the people with a preferred climate in geography in a different part of the country, what you get is a parallel economic system, one based on smuggling and drug production and one based on more normal things. 

So it’s a perfect recipe for a civil war. And basically, starting about a century ago, we got one in Colombia, eventually the lowlands, the Midlands, where the cocaine could grow, developed an illicit economy that was based on narcotics smuggling, whereas the uplands where most of the Colombians actually live, where most of the mineral economic activity was, when a different direction and these two zones clash and in time, eventually ideology played a part with international leftism being more powerful in the coca producing regions. 

And more laissez faire, semi capitalist, conservatism and normal economic activity playing a higher role in the higher lands. Now, by the time we get to the 2000s, the 80s were behind us. Miami Vice is behind us. United States realizes that cooking’s a real problem, and the 

Colombian cartels were a real national security threat. So the United States engaged in a $30 billion program of partnership with the Colombians to build out their military to basically win the Civil War. And by the time we got to the early 20 tens, that basically how things had played out far had been broken. They had been reduced to a much smaller footprint. And by the time you get to about 2015, they were basically spent as a military and a political force. 

But the cocaine didn’t go away because cocaine had a very different geography than where most Colombians lived. And so you had new forces that rose up to take place, specifically, the more right wing paramilitaries that were formed near and partnered with the government to fight before they all of a sudden moved into the old dark zones and started trafficking the cocaine themselves. 

So as often happens in a war, the victors then split and now we have a different problem. So the US government shifted tact because this was no longer a civil war in the traditional sense. The U.S. started to invest in economic programs in Colombia so that the small farm holders would have an option for their own economic wherewithal that was not dependent on narcotics. 

That’s flowers. That’s coco for chocolate, that’s coffee. Colombia still produces some of the world’s best coffee. Those three things together supplied by American Aid to help with infrastructure and development and planting and financing for farmers, was wildly successful. Until four years ago, we had a split in the Colombian political establishment. You see, until that point, pretty much all of the presidents of Colombia came from that kind of center, right? 

Laissez faire economics, strong national security point of view, because they had been in this civil war for so long. Well, four years ago we got a new guy by the name of Petro, who had a different view and had more political loyalties in some of these more outlying regions that had been somewhat disadvantaged by the civil war in the transition since, Petro is not the greatest politician, he calls himself a center left, as he calls himself, sometimes a socialist. 

A lot of people call him things that are worse, but really, he’s a populist. He believes that the institutions of Colombia are dead set against him and trying to, disrupt his presidency. He’s not a very good leader. He hasn’t selected very good people to be on his cabinet. He thinks that tariffs are a great economic policy to encourage domestic industrial development. 

He’s not really big, big fan of a rule of law, because it’s often on the opposite side of what he wants to do. And he focuses on his personal charisma to drive things through instead of building coalitions to get policies adopted. Does any of this sound familiar? I mean, he’s basically the Colombian version of Trump, just with some different political coloring. 

Anyway, as you might guess, you get two charisma forward non technocrats who, are very larger than life and bombastic with their personal politics. And the two of them have not got a lot. Trump and Petro. So we had a falling out very recently because Trump’s policies a little bit further to the east, have been blowing up ships outside of Venezuela. 

Colombia is a neighbor, Colombia. In Venezuela, they have never really gotten along. It’s not like the rallies or anything like that, but it has gotten a little bit too close to home. And Petro said that the last vessel that got blown up was actually Colombian fishermen. Now, no one on either side has provided any data or proof to their claims or their counterclaims.  

Was it Venezuelan drug smugglers don’t know us, hasn’t provided the US hasn’t provided any information. Was it Colombian fishermen? Don’t know. The Colombian government hasn’t provided any information, but it provided the spark that caused this current blowup between the two countries. And so the Trump administration has ended all military assistance and is in the process of ending all economic assistance. 

Now, whether this is a good or bad idea for foreign relations, I’ll let you decide that for yourself. But I can tell you exactly what it’s going to mean for cocaine without the military assistance. It’s arguable that the Colombian government doesn’t have the ability to impose rule of law through the coca growing regions, and without that economic system, it’s absolutely impossible for farmers in an outlined Highland area like this to economically viably grow things like the basics for chocolate and coffee and flowers. 

And so they’re going to turn back to growing coca to make cocaine. So is Petro a good leader? No. Absolutely not. And we’ve got elections next year. Hopefully he’ll be gone. But in the meantime, the Trump administration established the perfect environment to make sure that cocaine acreage explodes. And now that Americans seem to finally be turning away from fentanyl to more normal drugs, cocaine is there to fill the gap.

A $20 Billion Band-Aid for Argentina

Band aid on a crack in the street

The US just committed roughly $20 billion in a currency-swap with Argentina. That’s a whole lot of pesos. So, why did the US extend this lifeline, and will it save Argentina from itself?

The currency swap can buy Argentina some time by backstopping the peso. However, given the fundamentally flawed economic and political situation in Argentina (and the track record of defaults and currency collapses), this swap is just a band-aid.

The US is taking on a whole lot of risk, and I’m not seeing the upside here. Unless Argentina attracts real investment, undergoes massive reforms, and uses those God-given resources to their full potential…the US is just betting on a losing horse.

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Transcript

Hey all, Peter Zeihan here coming to you from Colorado. And today we’re going to talk about the American bailout of Argentina. So far, $20 billion has been committed to what’s called a currency swap agreement. That money is already in play. And there is discussion, of doubling that in the next couple of weeks. So what is a currency swap agreement? 

Why does, Argentina need it? And where’s this likely to go? So first currency swap. Basically that says is we are holding a certain amount of cash and reserve. You’re holding a certain amount of cash in reserve. And we will swap currency, in order to defend our respective, currency bands so that our currencies don’t crash. 

Now, with the United States having an economy that’s, like 20 times the size of Argentina, actually probably a lot more than that. It’s smaller than Wisconsin, I think. Obviously this is a one way benefit. The logic is that when the Argentinian currency starts to wobble, they sell, Argentinian pesos to the United States to increase demand, which drives the currency up. And in exchange, they get U.S. dollars. 

A lot of countries have these swap agreements to stabilize trading bands. And generally works, if the underlying economic fundamentals of your system are sound. So when I see countries like Korea and Japan and Vietnam and Thailand engaging in currency swap agreements like, yeah, no big deal. It’s basically a group insurance policy. 

When I see Argentina doing it, no, Argentina has defaulted on its debt 39 times last century or something like that. Lots. And all of those defaults has been preceded by a currency collapse, which is what they’re risking right now. And so the IMF is really a stickler that when the IMF lends you money, they don’t want to use it to defend your currency. 

If you can get a swap, agree. If you can fool a country and give you a swap agreement so that it’s their currency backing it, great. And that’s exactly what’s happened with the Trump administration. Trump considers the president of Argentina, , to be an ideological ally. I would point out the  does not think that reverse is true. 

And he’s basically milked the United States government for $20 billion, because if the currency falls by 80%, then the United States is holding Argentine pesos that are now worth $0.20 on the dollar. And judging by black market rates, we’ll probably see that in the next few months. Now, granted, if the Trump administration keeps handing over tens of billions of dollars at a time to defend the currency in Argentina, it might take longer. 

Dollars means something, but they’re not available in limited supply. The Treasury. What’s going wrong in Argentina? Argentina has had a series of just horrifically bad decision makers over the top. I wouldn’t say that a is one of them. 

in most regards, that have basically destroyed the state. They’ve eroded rule of law. They’ve taken policies that pushed the state in the middle of economic decision making for companies. 

They’ve put into place a really, tough tariff regime to, penalize imports. But then, because of the lack of rule of law and the erratic nature of those tariffs, nobody wants to invest money, in building out the industrial plant to build up the productive capacity in Argentina. Sound familiar to anyone? Anyway, as a result of years, decades of this, the Argentinean industrial plant has basically hollowed out the standard of living, has stagnated or fallen for over a century, and they keep borrowing to the tune of five 6% of GDP just to kind of make the numbers work, which just leaves them with more debt. 

And then when the currency does drop, they can’t service the debt. So they they default on everything. And we’re now seeing the current iteration of this. There had been some hope that under  it might be different this time. I think that was always overblown. Milei has shown. Yes. Shown results in getting government spending under control, but he hasn’t been able to get investment going without investment. 

The economy will never really be able to grow again. And so you’re just kind of marking time until the next collapse. And the next collapse is almost here. And this time it will take down quite a bit of U.S. money, taxpayer money in the meantime. Okay. How did we get here? Well, the key thing to remember about the Trump administration, there’s a lot of things to remember. 

The key thing is that, while Donald Trump was out of office between his first term and his second term, he took over the Republican Party and gutted its policy. It’s basically fired everybody. So when he came in, he no longer had a pool of skilled technocrats that he could draw upon to fill out the government. 

In fact, when he did come in, he fired the top six standard positions. And still now more than six months in, hasn’t showed them all because he doesn’t have enough people to fill them. And he surrounded himself at the cabinet level with people who would basically lie to him in order to make him feel better. I’d always counted Treasury Secretary descent as one of the rare ones who actually has the work experience justified for his position. 

But if there’s anything that they teach you like freshman economics is never, never, never, never, never fun to bail out for Argentina. So definitely knows that this is a horrible idea. And he’s already done the first bailout anyway, and is now putting the finishing touches on the second bailout. So my respect for him has dropped. 

Where does this lead? Well, so many people have been burned so many times by Argentina’s fiscal and monetary and debt collapses over the years that really no one will put money in the country anymore except the IMF. And only with very specific carve outs for what can be done. 

The IMF on many occasions has considered washing their hands of the situation and leaving Argentina just to die. But Argentina is by far their biggest customer, to the tune of like $41 billion of loans. 

So as long as there’s some degree of support in the United States for the Argentinian government, some degree of fiscal drip will continue. As for the United States. I have always, always, always, always held up Argentina as a potential warning for us. 

The United States is a powerful country, largely because of its geography. It’s got amazing chunks of arable land interspersed with navigable waterways, like the Mississippi. In the Ohio movie, Things by Water is about 1/12 the cost of moving them by land. And so during the pioneer era, we basically had five generations of uninterrupted economic growth, which set the stage for the U.S. becoming the global power that it is. 

In addition, oceans on both sides. I mean, it’s really hard to invade the United States. You put that together. Of course, the United States is the most powerful country in the world. And it’s really hard to screw it up. But Argentina has the second best geography in the world. Large chunk of flat arable land overlaid with the second densest concentration of navigable waterways in the world. 

Ocean on one side, mountains on the other, the Andes, and a series of physical breaks between them and Brazil to the north. 

Once again, it’s hard to screw up. But Argentina has proven that if you get up every day for decades and try to figure out how can I make it a little bit worse, you can overpower geography. 

Food for thought.

Qatar Bribes Its Way into Idaho

Flag of Qatar

Let’s first establish that Qatar is not building a new base in the US. They are funding an expansion of an existing US facility used to train F-15 pilots. And second, Qatar isn’t interested in those Idaho potatoes, they’re looking for something a bit more nuanced.

Qatar and the US don’t see eye-to-eye on most things, but both countries are willing to overlook those differences in favor of what they could gain from the relationship. The US maintains basing rights in Qatar for CENTCOM. Qatar gets some sweet and tasty leverage.

Washington, once again, finds itself in a political and ethical gray zone with another misaligned country in the Middle East.

Prefer to read the transcript? Click here

Transcript

Hey all, Peter Zeihan here, coming to you from Colorado. Today we’re going to take a question from the Patreon page. And it’s about this new military base that supposedly the Qatari government is building in Idaho. So, first let me clear up what’s going on and then give you an idea of what to expect. First of all, it’s not a fundamentally new military base. 

It’s an existing facility that is already used for training foreign forces, most notably the Singaporeans. And it’s going to be training Katari, F-15 pilots just like it does in Singapore. F-15 pilots. What’s different is that the Qatar are investing a huge amount of money to expand the facility. Normally, when foreign forces are training with the United States, we either do it there or if they do come here, they come to a preexisting facility. 

It remains under American control. It’s not going to be a Katari base, but it is definitely in the gray area. Because the Qatari are up front paying for the expansion. That’s not something that has ever happened, ever in American history. But to say that Qatari law is going to hold in Idaho, that is also not correct. 

So there’s a lot of misinformation out there on all sides. What we do need to discuss, however, is the Qatari. Qatar is a country in the Middle East. It’s that thumb that has under a million citizens. I think it’s like 400,000 citizens. And it sits on arguably the world’s largest natural gas field that has extraction infrastructure. 

There might be a couple in Russia that are bigger, but they’re untapped. And that means that the Qatari are just stupidly rich. By most measures, Qatar is the richest country in the world on a per capita basis. And as a result, Qatar has been using that money to basically carve out an independent foreign policy for itself. This includes a significant amount of terrorist financing. 

They like the Taliban. They like the Muslim Brotherhood in, Egypt. They used to be a big fan of Hamas until that became politically unpalatable, in Gaza. They’re backing probably the wrong side of the civil war in Libya. And, and, and and and the United States has its Centcom headquarters in Qatar and did so through the entire war on terror. 

And if that sounds weird to you, that’s because it is, the US military realized it needed a large footprint to coordinate its operations in Afghanistan, Iraq and the rest. And when it looked around for possibilities, it really didn’t find many. Obviously, it wasn’t going to put it in Iran. Obviously it wasn’t going to put it in Iraq, because that was a war zone was going to put in Saudi Arabia because Saudi Arabia said, no, we weren’t going to put it in, Kuwait because that was too vulnerable compared to what was going on in Iraq. 

Oman was neutral and wasn’t interested in that, really just left Qatar. And, the Qatari, while they were in all meaningful ways on the opposite side of the equation from the US military on every military issue that mattered, really wanted the Americans there as a geopolitical counterweight to the local powers in the area, most notably Saudi Arabian Iran. 

So whenever you’re doing anything in the Middle East, keep in mind that you’re going to be having some very strange bedfellows. And that is no different here than anything else. 

What is different is that the Qatari are completely shameless when it comes to seeking out people who are craven and are just desperate to be corrupted, and they try to spread their influence by using flat out cash. 

So if you remember the disgraced and I think now imprisoned, former Democratic congressperson, Bob Menendez, yes. There we go. From Jersey. He’s the guy who was found with, literally gold bars in his home because he was basically pimping his services for foreign governments. That was Qatar money. The Qatari basically bribed him. 

And so now what? We have the Qatari paying for infrastructure for the US military. We should view that in the same light. It is a bribe. This is also the same government that gave a, jet to the Trump administration. That’s basically to call it Air Force One. But when, Trump is out of the white House, it goes with him. 

That is also called a bribe. And they really don’t care who they bribe. Their goal is to get other countries to take policy decisions that back their position, because they’re a small state and in a straight up fight, they wouldn’t do very well. So they spread the money on thick. And if you’re going to condemn people on one side, like the new Jersey congressperson for taking gold bars to sell out his country, then you have to consider that everyone else who is taking money also maybe isn’t the most ethical person. 

But before you go around condemning everybody, keep in mind that we have had a base in Qatar for almost 25 years, and it is a ridiculous, but that is the cost of being a great power, apparently.